FRM Part I · FRM Exam Part I · Principles for Effective Data Aggregation and Risk Reporting
A bank's market risk report shows a trading desk's VaR but omits exposures held in a recently acquired subsidiary and in off-balance-sheet positions, although these are material. Which reporting practice is most clearly breached?
Comprehensiveness is breached. BCBS 239 expects risk reports to cover all material risk areas, including subsidiaries and off-balance-sheet exposures. Leaving out material positions gives management an incomplete view of risk, regardless of how often the report is produced or how clearly it is written.
- AFrequency, because the report is not produced daily
- BComprehensiveness, because the report does not cover all material risk areasCorrect
- CClarity, because the report uses technical terms
- DDistribution, because too many people receive the report
Explanation
Comprehensiveness requires reports to cover all material risk areas of the organization, including on and off-balance-sheet items and subsidiaries. The omission concerns scope, not timing, language or recipients, so frequency, clarity and distribution are not the primary failing.
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